Investing Notes PDF

**Investing** 3. Investment Planning ---- ------------------------------------------------------------------------------------------------------------------ 1. **Consider** factors influencing an investment portfolio including diversification and short and long term goals ---- -----------...

**Investing** 3. Investment Planning ---- ------------------------------------------------------------------------------------------------------------------ 1. **Consider** factors influencing an investment portfolio including diversification and short and long term goals ---- ------------------------------------------------------------------------------------------------------------------ **[Diversification]** Spreading your money across different investment types to spread the risk. **[Short Term Goals]** An investment of less than 3 years. *Chosen by people who want ready access to their funds because of the convenience of converting cash in a short period of time.* **[Long Term Goals]** Held for over 7 years. *Longer the period of investment, the higher the rate of return.* ---- ------------------------------------------------------ 2. **Explain** the relationship between risk and return ---- ------------------------------------------------------ A key factor in investing is the **rate of return**. This is the profit received on an investment. It is given by the equation: There are two main categories of investment: **Growth assets** (i.e., shares, property) generate a higher return over longer periods. However, their prices flucturate greatly in the short term so they are higher risk **Income or defence assets** (i.e., government bonds and term deposits) provide a low return but are lower risk; their value does not change dramatically in the short term. An **investment portfolio** is a collection of all investments as individual has. Includes term deposits, property, etc. 4. Financial Services Industry ---- ------------------------------------------------------------------------------------ 1. **Examine** the role of the financial services industry including the role of ASIC ---- ------------------------------------------------------------------------------------ - develop and maintain chosen financial systems and provide the relevant training to support operational and reporting needs - provide advice and oversight on the development and management of investments to ensure long-term financial gain - ensure transactions are processed accurately, in accordance with laws and policies, and in a timely manner - assist in the identification, evaluation and mitigation of risk Financial advisers must be licensed by ASIC. Responsible lenders obligations include: - making reasonable inquiries about the consumer's financial situation - taking reasonable steps to verify the consumer's financial situation - making an assessment about whether the credit contract is suitable based on the information in the first two obligations ---- ---------------------------------------------------------- 2. **Explore** the findings of the Banking Royal Commission ---- ---------------------------------------------------------- Investment opportunities change when federal government introduced deregulation on 1973; the removal of rules regarding how banks operate in Aus. The Australian Prudential Regulation Authority (APRA) oversees authorised deposit-taking institutions (ADIs, e.g., banks). ADIs are authorised to take deposits from customers under the *Banking Act 1959*. Deposit-taking institutions pool these deposits (lend individuals and bus in form loans & mortgage). **Running a Business** **2.1 Being an entrepreneur** ---- ----------------------------------------------------------------------------------------------------------- 1. **Define** the term entrepreneur and provide examples of entrepreneurs in a range of different industries ---- ----------------------------------------------------------------------------------------------------------- **Entrepreneur:** a person who sets out to build a successful business in a new field. An entrepreneur's methods are sometimes regarded as innovative. ---- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 2. **Describe** the required personal characteristics and skills needed for success as an individual entrepreneur -- including initiative, innovation, resilience and learning from failure. ---- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- **Demonstrating Initiative, innovation and resilience:** - [Initiative] is being resourceful and deciding what to do and when to do it. It's doing things you shouldn't be told; finding out what you need to know; taking advantages of opportunities; keep going when things get tough. - [Resilience] is needed when things are stressful and unpredictable. It helps cope with the ups and downs, adapt well to change and bounce back from challenges. - [Innovation] is the process of creating a new or improved product, service or process. **Role of failure in success** Entrepreneurs do not fear failure; they view it as an opportunity to learn. They embrace failure and grow from it. ---- --------------------------------------------------------------------------------------------------------------------------------------------------------------- 3. **Explain** the qualities and contributions that have led to the success of individual entrepreneurs eg: Aboriginal and Torres Strait Islander entrepreneurs. ---- --------------------------------------------------------------------------------------------------------------------------------------------------------------- Dion Devow is an Indigenous entrepreneur who established Darkies Design, and used this controversial negate the derogatory term and express pride in his heritage. He identified a business opportunity after not finding Indigenous Australian clothing labels that suited him. He realised there was a gap in the market for contemporary Indigenous clothing. He believes all aspiring entrepreneurs should build relationships whither other businesses through mentoring, informal discussions, business associations or formal networking forums. Networking introduced people who become key contacts for developing a business. He believes in market research as a way of mitigating risks involved in running a business. **2.2 Planning for success** ---- ----------------------------------------------------------------- 1. **Identify** the business idea and prime function of a business ---- ----------------------------------------------------------------- The successful identification of a *gap in the market*. It means that the new business provides something not already available. They need a competitive advantage. *Competition* is rivalry among businesses that seek to satisfy a market. A business must devise strategies to capture competitors' *market share* to establish a customer base. A business can compete in 2 ways: - *Cost Leadership* -- producing/selling goods and services at low pieces has strong ability to attract market share. - *Differentiation* -- making a product or service unique and better than its rival can increase market share. ---- -------------------------------------------------------------- 2. **Examine** different types of businesses and their features ---- -------------------------------------------------------------- **Online:** Runs business using internet. Provide opportunities for aspiring entrepreneurs, regardless of age and experience, to create virtual experience that sells direct to world without associated costs of "brick and mortar" business. **On demand:** Uses mobile technology apps to maximise consumer convenience; do not have to wait. **Global:** Referred to as Transnational Corporation is large company that has branched in different countries. Highest level of involvement is in global business. **Offshore:** Businesses get function completed in different countries to take advantage of cheap production costs in developing country such as lower wages, less strict environmental regulations. Workers long hours little pay in unsafe conditions. **Small/Large Scale:** - Micro business: fewer than 5 employees - Small business: 5 -- 19 employees - Medium: 20 -- 199 employees - Large: 200+ 98% businesses in Aus are small to medium enterprises, less than \$10 million turnover. Provide employment for 7 million people. Large businesses operate on a national or global scale. **Government:** Owned and operate by gov. Provide essential community services such as health, education and roads. E.G., Aus Post and Sydney Water. **Not for profit:** Services to community. All money earned from donations must go back into services the business is providing to the community. Receive tac concessions. E.G., charities, sporting and recreation clubs, community service organisation. ---- --------------------------------------------------------------------- 3. **Assess** importance of following factors when setting up business ---- --------------------------------------------------------------------- - Market Research: Collecting and analysing information about customers and business opportunities available through interviews, surveys and research. Reveals facts and attitudes of customers. - Primary Sources: facts and figures collected from original sources for purpose of specific research problem. E.G., surveys, focus groups - Secondary sources: refers to facts and figures already collected by someone else or organisation. E.G., research reports, census date E.G., many retailers use loyalty cards as part of MR. Provide stores with data about customers (gender, age, address, household size". Business creates profile on customers' buying habits. Use data promote products in effective way - Location: Brick and Mortar stores: Good location make difference between success and failure Online Businesses: Virtual location in important google search rank. - Demographics: Population characteristics that affect customer spending including age, ethnicity, gender, marital status, family size and income. Important understanding changes taking place in make-up of population. - Competition: Decide on type of market which good or service will compete. - Mass market -- broad market (e.g., Coles, Westfields brands) - Niche market -- specialised market (e.g., vegan food products, high fashion) Develop competitive advantage by: *Lowering the price* -- lower price to consumers attractive and allows business to gain larger market share (larger proportion of sales in market\_. E.G., Bunning. Harvey Norman. Woolworths. *Offering a different, innovative product* -- Making better quality product has unique features or improving customer service allows business obtain competitive advantage. E.G., Apple. - Target Markets: WHO will buy good or service. Marketing aimed at TM. - Staffing - New vs established vs franchising +-----------------------------------+-----------------------------------+ | **Advantages of starting a | **Disadvantages of starting a | | business from scratch** | business from scratch** | +===================================+===================================+ | - Owner has freedom to set up | - high risk and a measure of | | the business exactly as he or | uncertainty. | | she wishes. | | | | - difficult to secure finance. | | - Owner's objectives can be | | | matched more closely to the | - Time is needed to develop a | | business. | customer base, employ staff | | | and develop lines of credit | | - determine the pace of growth | from suppliers. | | and change. | | | | - If the start-up period is | | - flexibility to select the | slow, then profits may not be | | location, target market, | generated for some time. | | range of products and level | | | of customer service. | - Potential customers may be | | | more difficult to attract | | - no goodwill for which the | than initially expected or | | owner has to pay. | unforeseen competition may | | | appear, especially if the | | - If funds are limited, it is | level of planning was | | possible to begin on a | inadequate. | | smaller scale. | | +-----------------------------------+-----------------------------------+ Existing business purchased, everything associated with business included in purchase. +-----------------------------------+-----------------------------------+ | **Advantages of purchasing | **Dis purchasing established | | established business** | business** | +===================================+===================================+ | - Sales to existing customers | - The existing image of the | | will generate instant income. | business may be difficult to | | | change, especially if the | | - A good business history | business had a poor | | increases the likelihood of | reputation. | | business success. | | | | - The success of the business | | - Stock has already been | may have been due to the | | acquired and is ready for | previous owner's personality | | sale. | and contacts which may be | | | lost when the business is | | - Equipment is available for | sold. | | immediate use. | | | | - It may be difficult to assess | | - Existing employees can | the value of goodwill with | | provide valuable assistance. | the likelihood of paying more | | | than the business is worth. | | | | | | - Some employees may resent any | | | change to the business | | | operation. | +-----------------------------------+-----------------------------------+ Franchising is buying the rights to use the business name and distribute the goods or services of an existing business. People choose to start a franchise in the hope of avoiding many of the problems associated with starting a new business. +-----------------------------------+-----------------------------------+ | **Advantages of purchasing a | **Dis purchasing a franchise** | | franchise** | | +===================================+===================================+ | - Products, equipment, premises | - The franchisor usually | | design and marketing are | controls everything to do | | usually established. | with price, suppliers and | | | health regulations. | | - The franchisor often provides | | | training. | - Profits must be shared with | | | the franchisor. | | - There is less need for the | | | franchisee to have previous | - The franchisor often charges | | business experience. | a service fee for advice. | | | | | - The investment risk may be | - Contracts may be biased in | | lower. | favour of the franchisor. | | | | | - There is immediate benefit | - The franchisee may merely | | from the franchisor's | feel like an employee, but | | goodwill. | without the benefits and | | | security. | | | | | | - The franchisee has to deal | | | with day-to-day operations | | | and they are legally | | | accountable. | +-----------------------------------+-----------------------------------+ ---- ------------------------------------------------------------ 3. **Describe** the range of options for financing a business ---- ------------------------------------------------------------  Adv: Adv: - Doesn't have to sell ownership of business - doesn't have to be repaid unless owner leaves business - Taxation advantages - cheaper than debt because no interest payments **Debt Finance** -- the short (overdraft) and long-term (mortgage) borrowing from external sources by a business (e.g., by a bank) - The cost (interest) of finance will depend on the type of finance that businesses choose, the source and the length of time +-----------------+-----------------+-----------------+-----------------+ | **type of debt | **advantage** | **disadvantage* | **example** | | finance** | | * | | +=================+=================+=================+=================+ | *[Overdraft]{.u | - Available | - Higher | Suitable for | | nderline}* | at short | interest | businesses that | | | notice | rate (10% | | | - Bank allows | | p.a) | need to cover | | business to | - Flexible | | employee wages, | | overdraw | | - Bank can | stock | | account up | | demand | purchases, | | to agreed | | repayments | supplier | | limit and | | at any time | invoices, | | for | | | unexpected | | specified | | | expenses such | | time | | | as equipment | | | | | failure ot | | - Smaller | | | taxes. Useful | | amounts | | | as requires no | | (less than | | | security, | | \$100 000) | | | available at | | | | | short notice | | - Help | | | and know cost. | | overcome | | | | | cash | | | | | shortfall | | | | +-----------------+-----------------+-----------------+-----------------+ | *[Mortgage]{.un | - Access to | - Not meeting | Businesses | | derline}* | large | repayments | buying property | | | amounts of | lead to | to sell good or | | - Loan uses | money | foreclosure | service. | | property as | | | Expensive so | | security | | - Interest | having agreed | | | | incurred -- | upon time | | - Purchase | | interest | period useful | | premises | | lower | | | with | | payments | | | periodic | | longer | | | payments | | | | | | | | | | - Agreed time | | | | | frame | | | | +-----------------+-----------------+-----------------+-----------------+ Debt financing influenced by level of interest rates. Interest rates are **COST** of borrowing money Interest rates can change depending on decisions made by government an banking institutions **Equity Finance** -- shares, owners' capital and profit that is reinvested in business **Preparing a loan application:** A loan is an agreement to borrow a set amount of money that needs to be repaid within a period of time (known as 'term'). Anyone that borrows money must pay interest at a fixed or variable rate. A loan may be [secured] or [unsecured.] - *[Secured]* -- offers an asset as security, lower interest but risk that lender right to sell security if unpaid - *[Unsecured]* -- interest rate is higher **Prospectus:** If public companies offer securities (shares, debentures) for sale then must provide document to potential investors. A legal document issued by companies that are offering securities for sale. Must contain: - Rights and liabilities attached to offered securities - Issuing company's assets and liabilities, financial position and performance, profits and losses Typically includes: - History of business - Business model - Risks - Description of management Role is to make investors aware of risks of investment. Protects company future accusations that did not disclose enough information about itself or securities. ---- ------------------------------------------------------------------------ 4. **Discuss** the key features of each of the following legal structures ---- ------------------------------------------------------------------------ +-----------------+-----------------+-----------------+-----------------+ | **Un/incorporat | **Type legal | **adv** | **dis** | | ed** | structure** | | | +=================+=================+=================+=================+ | UNINCORPORATED | Sole Trader | - low cost | - unlimited | | (not a separate | | entry | liability | | legal entity | - A business | | business | | from business) | that is | - simplest | debts | | -- UNLIMITED | owned and | form | | | LIABILITY | operated by | | - end | | | one person. | - complete | business | | | This may | control | when owner | | | employ | | dies | | | other | - less costly | | | | people to | operate | - carry all | | | work for | | losses | | | the | - owner's | | | | business, | right keep | - burden | | | but the | profits | management | | | sole trader | | | | | is the | - less gov | - perform | | | person who | regulations | variety | | | provides | | tasks | | | all the | - no tax | | | | finance and | profits, | - difficulty | | | makes all | only | raising | | | the | personal | finance for | | | decisions | income | expansion | | | to take | | | | | responsibil | | | | | ity. | | | +-----------------+-----------------+-----------------+-----------------+ | UNINCORPORATED | Partnership | - low startup | - unlimited | | | | costs | liability | | | - A legal | | | | | business | - less costly | - liability | | | structure | operate | all debts, | | | that is | than | including | | | owned and | company | partner's | | | operated by | | | | | 2-20 | - shared | - disputes | | | people. | responsibil | | | | There are | ity | - difficulty | | | exceptions | and | finding | | | to this | workload | suitable | | | number, | | partner | | | including | - pooled | | | | medical | funds and | - divided | | | practitione | talent | loyalty and | | | rs | | authority | | | and | - minimal gov | | | | stockbroker | reg | | | | s. | | | | | | - not taxes | | | | | business | | | | | profits, | | | | | only | | | | | personal | | | | | income | | +-----------------+-----------------+-----------------+-----------------+ | INCORPORATED | Private | - Limited | - Regular | | (separate legal | company: | liability | compliance | | entity from | | | | | business) -- | - A | - Higher take | - limited by | | LIMITED | proprietary | home pay | shares | | LIABILITY | company is | | | | | the most | - Separate | - limited | | | common type | legal | personal | | | of company | entity | control | | | structure | | | | | in | | | | | Australia | | | | | and between | | | | | 2 - 50 | | | | | private | | | | | shareholder | | | | | s. | | | | | Shares are | | | | | only | | | | | offered to | | | | | people the | | | | | business | | | | | wishes to | | | | | have as | | | | | part-owners | | | | |. | | | | | Shareholder | | | | | s | | | | | can only | | | | | sell their | | | | | shares to | | | | | people | | | | | approved by | | | | | other | | | | | directors. | | | +-----------------+-----------------+-----------------+-----------------+ | INCORPORATED | Public Company | - Access to | - Disturbance | | | | capital | in business | | | - They are | | | | | large in | - Employee | - Cost of | | | size and | incentives | issuing | | | market a | | shares | | | large range | - Being open | | | | of | to | - Public | | | products- | takeovers | information | | | Woolworths, | | scrutiny | | | Telstra, | | | | | BHP | | | | | Billiton | | | | | and | | | | | Westfield. | | | | | | | | | | They have | | | | | at least | | | | | one | | | | | shareholder | | | | | and no | | | | | restriction | | | | | s | | | | | of shares | | | | | or raising | | | | | money. | | | +-----------------+-----------------+-----------------+-----------------+ ---- --------------------------------------------------------------------------------- 4. **Identify** the factors contributing to success or failure of small businesses ---- --------------------------------------------------------------------------------- +-----------------------------------+-----------------------------------+ | **Advantages of starting a | **Disadvantages of starting a | | business from scratch** | business from scratch** | +===================================+===================================+ | - The owner has the freedom to | - There is a high risk and a | | set up the business exactly | measure of uncertainty. | | as he or she wishes. | | | | - Without a previous business | | - The owner's objectives can be | reputation, it may prove | | matched more closely to the | difficult to secure finance. | | business. | | | | - Time is needed to develop a | | - The owner is able to | customer base, employ staff | | determine the pace of growth | and develop lines of credit | | and change. | from suppliers. | | | | | - The owner has more | - If the start-up period is | | flexibility to select the | slow, then profits may not be | | location, target market, | generated for some time. | | range of products and level | | | of customer service. | - Potential customers may be | | | more difficult to attract | | - There is no goodwill for | than initially expected or | | which the owner has to pay. | unforeseen competition may | | | appear, especially if the | | - If funds are limited, it is | level of planning was | | possible to begin on a | inadequate. | | smaller scale. | | +-----------------------------------+-----------------------------------+ **2.3 Operations** ---- ----------------------------------------------------------------------------------------------- 1. **Outline** the role of operations in a business (transformation process, inputs and outputs) ---- ----------------------------------------------------------------------------------------------- **Operations Management: all activities which managers engage to produce a good or service It has a considerable influence on the quality, cost, and availability of a business's goods or service. These influence the businesses' ability to achieve goals (e.g., maximise profits). It will:** - **Establish level of quality of good or service** - **Influence overall cost production (is responsible largest part business's capital and human expenses)** - **Determine whether sufficient products are available to satisfy consumer demand** **Transformation: conversion of inputs (resources) into outputs (goods or service)** **Outputs: good or service produced as a result of businesses' efforts**  **Inputs:** resources used in transformation (production) process. Divided into *[transformed]* or *[transforming]*. ***[Transformed resources:]*** Transformed by operation process. Resources include: - *materials:* the basic elements used in the production process. - *information:* the knowledge gained from research, investigation and instruction, which results in an increased understanding - *customers:* customers become transformed resources when their choices shape inputs. ***[Transforming resources:]*** enable the change and value-adding to occur. Two main transforming resources: - *human resources:* the people that are employed by the business - *facilities:* the plant (factory or office) and machinery used in the operations process. ---- ---------------------------------------------------------------------------------------------------- 2. **Describe** the regulations impacting on a business operational at local, state and federal level ---- ---------------------------------------------------------------------------------------------------- **Federal government regulations**: - payment of Pay As You Go (PAYG) income tax and fringe benefit tax, where applicable - possible collection of goods and services tax (GST) on behalf of the Australian Taxation Office - provisions for employee superannuation - not engaging in anti-competitive practices - protecting consumers from undesirable business practices - not engaging in misleading or deceptive advertising. **State government regulations** - provision of employee entitlements such as award rates of pay and conditions - abiding by work health and safety regulations - taking out workers' compensation insurance - abiding by any pollution controls - observing regulations relating to the sale of food, cigarettes and alcohol - adequate and non-deceptive labelling of all foodstuffs and clothing. **Local government regulations** - determining land zoning (use) and approving new development applications - fire regulations, especially fire prevention facilities - parking regulations governing the number of spaces that need to be provided - health regulations, especially the safe handling of food ---- -------------------------------------------------------------------------------------------------- 3. **Explain** key operations strategies such as quality management (quality control and assurance) ---- -------------------------------------------------------------------------------------------------- **Quality Management:** those processes that a business undertakes to ensure consistency, reliability, safety and fitness of purpose of product. The common approaches to quality include control and assurance. - ***Quality Control:*** [reactively] reduces problems in the product by using [inspections] and [sampling] at various points in the production process. The process may require labour to be appropriately trained to apply the standards throughout the process. Goods can be inspected and are either passed or defective. This can increase wastage as defective products are often disposed of. - ***Quality Assurance:*** a system that ensures previously set standards are achieved in production. To ensure that the business meets fitness for purpose (the product does what it is supposed to do) & right-first-time objectives. Aspects of QA include: ***- 'fitness for purpose'*** how well a product does what it is deigned to do ***- achieve 'right first-time'*** so products don't need to be reworked **2.4 Marketing** ---- ------------------------------------------------------------------------------------- 1. **Outline** the role of marketing in a business (increasing sales, brand awareness) ---- ------------------------------------------------------------------------------------- **Marketing: strategic development strategies used maximise sales, increase brand awareness and improve customer satisfaction achieving goal profit maximisation.** ---- ---------------------------------------------------------------------------- 2. **Investigate** a range of businesses and their successful marketing plans ---- ---------------------------------------------------------------------------- +-------------+-------------+-------------+-------------+-------------+ | **Name** | **Product | **Price | **Promotion | **Place | | | strategy** | strategy** | strategy** | strategy** | +=============+=============+=============+=============+=============+ | Coco Cola | - Lots of | - Flexibl | - Creativ | - Present | | | variety | e | e | in more | | | \"buffe | pricing | promoti | than | | | t | strateg | onal | 200 | | | of | y | strateg | countri | | | product | | y | es | | | s\" | - Price | | and | | | | discrim | - Never | territo | | | - Five | ination, | deviate | ries | | | main | where | s | | | | categor | largely | from | - Vast | | | ies, | similar | the | and | | | Sparkli | or | basics | extensi | | | ng | identic | | ve | | | Soft | al | - Santa | distrib | | | Water, | g+s are | clause | ution | | | Water | sold at | | network | | | and | diff | - Happine | | | | hydrati | prices | ss | - 6 | | | on, | by the | underli | geograp | | | Juices, | same | ning | hic | | | Dairy | provide | the | | | | and | r | campaig | | | | plant | in | ns | | | | based, | differe | through | | | | coffees | nt | out | | | | , | markets | history | | | | and | | | | | | teas | - Fixed | - \"I\'d | | | | | pricing | like to | | | | - 500 | for the | buy the | | | | beverag | syrup | world a | | | | es | | coke | | | | | - Profits | commerc | | | |   | can | ial\" | | | | | only be | | | | | | maximis | | | | | | ed | | | | | | by | | | | | | maximis | | | | | | ing | | | | | | the | | | | | | amount | | | | | | of | | | | | | product | | | | | | sold | | | +-------------+-------------+-------------+-------------+-------------+ ---- --------------------------------------------------------------------------------------------- 3. **Explain** key marketing strategies such as the 4P's (Product, Price, Promotion and Place) ---- --------------------------------------------------------------------------------------------- **Product:** goods and services offered exchange purpose satisfying need or want. ***Branding:*** provides benefits for buyers and sellers [Branding helps consumers:] - identify the specific products that they like. - evaluate the quality of products, especially when a consumer lacks the expertise to judge a product's features   [Branding helps businesses: ] - gain repeat sales because consumers recognise the business's products - introduce new products onto the market because consumers are already familiar with the business's existing brands **Price:** money customer prepared pay. 3 types of pricing ***Cost Based Pricing:** (*total cost of production + additional cost) x markup percentage = price - easy to apply but doesn't account changes in market demand and economic conditions - difficulty accurately determining appropriate mark-up percentage ***Market Based Pricing:*** price set to interactions between supply and demand. - When demand exceeds supply, *shortages* occur and the price increases (i.e. housing market). When supply exceeds demand, *surpluses* occur and the price decreases (i.e. Bananas in summer). ***Competition Based Pricing:*** set in relation competitors and *price leaders* in firm's market. Priced: - **below** competitors to undercut the competition. Gain market share or break into an established market. - **equal** to the competition. Uses market leader as a guide - avoids having to undertake market research, reduces risk of competition war. - **above** (*prestige pricing*) competition. Those who wish to perceive product as superior, appealing to status conscious. **Promotion:** methods used business to inform, persuade and remind TM about tis products. Include - *advertising* grab attention of public through TV commercials, newspapers, radios, billboards +-----------------------------------+-----------------------------------+ | **Adv** | **Dis** | +===================================+===================================+ | - builds customer awareness | - Price impact adds cost | | | production, therefore add | | - promoted benefit | higher markup | | | | | - communicate info about | - Hard guarantee reach right | | business | audience | | | | | | - Difficult standout many | | | businesses advertise | +-----------------------------------+-----------------------------------+ - *personal selling* sales rep persuades customers through knowledge and personal characteristics - *relationship marketing* encouraging loyalty through strategies repeat purchases, loyalty discounts +-----------------------------------+-----------------------------------+ | **Adv** | **Dis** | +===================================+===================================+ | - builds customer trust | - loss customer loyalty | | | salesperson quits, or if | | - detailed demonstration | sales personal unhelpful | | | | | - targeted to customer and | - limited customer reach | | personal | | +-----------------------------------+-----------------------------------+ - *sales promotion* short-term campaigns spark interest and create demand e.g., discounts, product giveaways, additional prize +-----------------------------------+-----------------------------------+ | **Adv** | **Dis** | +===================================+===================================+ | - control and remove excessive | - quality image tarnished | | stock | perceived cheap product | | | | | - insights into customer | - short term strategy too | | behaviour | momentary and doesn't deal | | | customer relationships, | | - encourages loyalty and repeat | product pricing and | | purchases | innovation | | | | | | - increased sensitivity to | | | price; customers hint | | | discounts | +-----------------------------------+-----------------------------------+ - *publicity and public relations* sponsorship, product placement to gain exposure. Unpaid, free media coverage. How businesses manage relationship with public (conference, statement, etc) +-----------------------------------+-----------------------------------+ | **Adv** | **Dis** | +===================================+===================================+ | - crisis management and | - limited influence over media | | reputation control | coverage and public | | | perception | | - builds brand image | | | | - rely on discretion of | | - raise awareness business and | journalists, editors | | generate interest | | | | - lack guaranteed results | +-----------------------------------+-----------------------------------+ **Place:** Distributing product from where it is made to the consumer. - ***Product to consumer:*** g/s passed directly onto consumer - ***Producer to retailer to consumer:*** retailer used as intermediary who accesses goods from producer and then sells to consumer - ***Producer to wholesaler to retailer to consumer:*** wholesaler takes responsibility for distributing the producer from producers to retailer **2.5 Finance** ---- ------------------------------------------------------------------------------------------------------ 1. **Outline** the role of finance in a business e.g., inform decision making, legal requirements, etc. ---- ------------------------------------------------------------------------------------------------------ All small business owners need a set of accurate and up-to-date financial records to track the success of their business and to help minimize risk. This is important as it helps: - ***make informed decisions***: need good financial records which help monitor progress. Tells sales increasing or decreasing, expenses, which items selling, if meeting goals, stock on hand. Allows make decision increase business success. - ***fulfill legal requirements:*** by law keep records including business registration leases, contracts, records relating incomes and expanses, who employ, insurance documentation. - ***meet tax obligations:*** meeting fed and state tax obligations - ***obtain funding for loans:*** lenders and investors want see accurate financial records such as balance sheet and income statements - ***enable businesses to manage their cash flow:*** see how much have available and whether this will be sufficient meet obligations. ---- ---------------------------------------------------------------------------------------------------------- 2. **Construct** and **analyse** profit and loss statements, balance sheets, cash flow and taxation records ---- ---------------------------------------------------------------------------------------------------------- **Profit and loss statements:** an income statement is a summary of the income earned, and the expenses incurred over a period of trading. Tells us about businesses PROFITABILITY. - Gross Profit = sales -- COGS - Net profit = gross profit -- expenses - Expenses = gross profit -- net profit A yellow bill with black text Description automatically generated **Balance sheets:** position of a business at a point of time. It records: - [Value assets] -- owned by business *Current:* used within 12 months (cash, accounts receivable, inventory) *Non­-current:* used over 12 months (land and buildings, equipment, fixtures) - [Value liabilities] -- debts owned by business to others *Current liabilities:* paid withing 12 months (overdraft, accounts payable and credit cards) *Noncurrent liabilities:* paid over 12 months (mortgage, long-term back loans) - [value owner's equity] -- money owner has invested in business Assets = liabilities + owners equity  **Cash flow statements:** movement of cash receipts (money from sales), and cash payments (payments for expenses) over time. - business can calculate its surplus or deficit of cash - indicator of business's [liquidity] ability business pay short term debts on time Opening Balance: what cash business had at start **2.6 Human Resources** ---- ------------------------------------------------------- 1. **Outline** the role of Human Resources in a business ---- ------------------------------------------------------- **Human Resources:** effective management of formal relationship between employer and employees. Businesses should: - take care to hire best people *screen peoples resumes, testing emotional and intelligence, in person interviews develop cooperative and effective working relationships, digital footprint* - motivate staff to do best in workplace *team building days, check ins with staff, rituals Christmas part and birthday celebrations* - provide employees with opportunities for training and development *training courses, seminars, staff development days, interns/student opportunities to observe staff* ---- ------------------------------------------------------------------------------------- 2. **Explain** key human resource strategies (e.g., training and development, rewards) ---- ------------------------------------------------------------------------------------- - **Training** is building the [current] skills, knowledge and attitudes of an employee for superior performance - **Development** is preparing employees for [future] responsibilities within organisation due change in businesses' strategies or growth in size or market share [Monetary] Additional monetary payments that are given to employees and are beyond the employee's minimum legal entitlements. - Direct benefits such as wage increase, bonuses, commissions - Indirect such as fringe benefits, company car, insurance, medical and health   [Non-monetary] [Intrinsic rewards] such as interesting and challenging work, responsibility and [fringe benefits] such as entertainment allowance, company credit card, product discount plan. Some employees are motivated by other work benefits associated with the job itself or working for the company.   - Can be categorised as fringe benefits, status-related benefits and intrinsic rewards. - Interesting and challenging work - Socialisation - Recognition - Titles +-----------------------+-----------------------+-----------------------+ |   | **Benefits** | **Costs** | +=======================+=======================+=======================+ | **Monetary Rewards** | - Simpler to | - Create | | | administer | difficulties in | | | | sustaining high | | | - Motivate | level motivation | | | employees to do | | | | best work | - If employees earn | | | | bonus, may expect | | | - Increase | similar rewards | | | employment | in future; | | | engagement | unrealistic | | | | expectation | | | - Help offset pay | leading to | | | freezes or salary | disappointment | | | increases during | | | | economic | - Wont motivate | | | hardships | employees who | | | | aren\'t motivated | | | - Keep employees | by money | | | happy while | | | | helping your | - Create unhealthy | | | company stay | competition | | | competitive in | | | | labour market | - Create stress | | | | among employees | | | - Motivate | and make feel | | | employees of all | less connected to | | | level and | each other | | | background, from | | | | those with little | | | | experiences to | | | | senior managers | | | | who have been | | | | working for | | | | decades | | +-----------------------+-----------------------+-----------------------+ | **Non-Monetary | - Fringe benefits | - Waste of money | | Rewards** | attract | | | | millennials/young | - Full | | | people | participation is | | | | not guaranteed | | | - Inexpensive | | | | | - Hard to organize | | | - Higher employee | | | | satisfaction | | +-----------------------+-----------------------+-----------------------+ ---- -------------------------------------------------------------------------- 3. **Investigate** a range of businesses and their successful HR strategies ---- -------------------------------------------------------------------------- **[GOOGLE]** 1. How has google retained its employees? - Screened for cognitive ability and leadership skills - Not looking for specific degrees from specific schools means wider pool of candidates +-----------------------------------+-----------------------------------+ | **Adv strategy** | **Dis strategy** | +===================================+===================================+ | - solving problems, so testing | - Lack of credentials ask for | | a person\'s resilience and | means people have little | | ability to improvise with | knowledge on how google works | | finding a solution to a | and what job entails; person | | problem helps HR and | may have high IQ but know | | employers see what they can | little about computers | | contribute | | | | - Screening lots of people is | | - Aim to create a positive | costly and takes up more time | | workplace environment where | | | people are motivated to come | - Focus on work place enjoyment | | to work | may lead to low productivity | | | \--\> hard to monitor who is | | - Attract young people who are | working, and who is slacking | | keen to learn and try | off because have so many | | different methods when | employees | | approaching a task, rather | | | than older people who are | | | more rigid and stuck in their | | | old ways when approaching a | | | task | | | | | | - Wider range of people working | | | for them - more innovation | | | and different perspectives | | +-----------------------------------+-----------------------------------+ ---- --------------------------------------------------------------------------------------------- 4. **Identify** and **develop strategies** to minimize risk to avoid insolvency and bankruptcy ---- --------------------------------------------------------------------------------------------- **Risk Management** is the process of evaluating the risks faced, calculating the possible costs, implementing procedures to minimize such risks. **Possible risk** **Risk minimisation strategy** --------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Rising debts Cut down on expenses. Enforce credit policy and charge fee for late payments Lawsuits Maintaining a good reputation for your business and hiring a good lawyer. Be educated on legal responsibilities. Having disclaimers, appropriate product testing, insurance. Falling sales Focusing on the quality of product, investigating why the good/service is not selling well, thinking of a different approach to get product out to target market. Machinery breakdowns Insurance, warranties, insure staff are properly trained. Physical damage of the business or products Regular inspections, quality control, quality assurance. Change way of production. Copyright infringement Hire a lawyer, protection of new product. Supplier problems Change supplier, backup options, good relations with supplier, have samples to see if it is fit for purpose. Ill health of the owner or business manager Promote someone who has responsible business ethics and can easily step in for a smooth transition. Insure everyone is well trained. Tax obligations Paying taxes, detailed records Expanding too quickly Focusing on quality over quantity, set limits to orders **SWOT Analysis:** provides information help place business stronger financial position, to set new goals.  **2.7 Current Issues** ---- ------------------------------------------------------------------------- 1. **Outline** the ways businesses respond to changing economic conditions ---- ------------------------------------------------------------------------- +-----------------------------------+-----------------------------------+ | **Business responses to peaks** | **Business response to troughs** | +===================================+===================================+ | - Increase employees' wages and | - Keep employees' wages and | | salaries | salaries at current levels | | | | | - Increase production to take | - Decrease or maintain | | advantage of an increase in | production at current levels | | sales | | | | - Decrease the size of the | | - Hire more staff | workforce | | | | | - Increase prices | - Keep prices at the same level | | | | | - Expand business | - Put a stop to expansion or | | | possibly close some locations | | - Invest in new equipment, | | | technology or assets | - Maintain current equipment, | | | technology or assets | +-----------------------------------+-----------------------------------+ **Employment and Work Futures** **3.1 Work and wellbeing** ---- -------------------------------------------------------------------------- 1. **Define** the concept of work and the benefits associated with working. ---- -------------------------------------------------------------------------- Contributing to the economy as workers pay tax to the government, which the government spends on providing people with jobs. ---- ----------------------------------------------------------------------------------------------------------------------------------------------------------------- 2. **Describe** the relationship of work to quality of life e.g., disposable income, health, household economic wellbeing, superannuation and household management ---- ----------------------------------------------------------------------------------------------------------------------------------------------------------------- **Disposable Income:** Funds available after taxes, bills, etc. Surplus income can be spent on leisure. **Superannuation:** Tax advantages and save more for retirement/retire sooner and more comfortable. **Household management:** cost of living stressful; having job eases compulsory expenses. Satisfaction from knowing doing job well and received praise is rewarding. ---- --------------------------------------------------------------------------------------------------------------- 3. **Outline** how work contributes to an individual self-esteem and material and non-material living standards. ---- --------------------------------------------------------------------------------------------------------------- ---- ------------------------------------------------------------------------------------------------------------------------------------------------------ 4. **Explain** the redistribution of income through taxation, and government expenditure, e.g. in education, health, infrastructure and social welfare. ---- ------------------------------------------------------------------------------------------------------------------------------------------------------ Workers pay taxes to the government. The government will then redistribute these funds and provide the collective wants that the society desires such as education, health, roads, railways, and social welfare such as the aged pension. The government redistributes income through the progressive income taxation system in Australia. This means that the tax taken from income earners is spent on ensuring the equitable distribution of income in Australia.   - The Australian Bureau of Statistics has analysed that government spending and taxes reduce income inequality by more than 40% in Australia (2015-16).   Almost all families will pay personal income tax and GST and receive some kind of government benefit at some point in their lifetimes (whether this be social welfare payments, access to education, healthcare etc) **3.2 The Workplace** ---- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. **Outline** the role of various participants in the workplace, including employers, employees, contractors, industrial organisations/unions, state/territory and Commonwealth governments, ---- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- **Employers:** Subject to same responsibilities and requirements including a safe workplace, adequate financial compensation for work completed, education training, contributions to superannuation\'s, etc. **Employees:** Work for another person or entity in return for financial compensation. **Contractors:** Enables businesses to get best help needed in specialist areas, but cuts costs. E.G., Target stores need visual merchandisers to design window displays at peak periods such as Christmas. Each Target store, contracts the work of the visual merchandiser to complete the required window display, and then pays them for their contracted time, rather than employing them as full-time employees. **Unions:** Organisation of workers who actively seek better pay, sager working conditions and increased job security. **Governments:** Create and sustain employment in Australian states and territories. All 3 levels involved in planning and implementation of laws and projects that's generate jobs. Have power and influence over jobs markets. Enforce employment standards e.g., regulation minimum wages, leave and supper entitlements, etc. ---- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 2. **Examine** and compare the types of work and work arrangements, including full-time, part-time, casual, at home, paid, unpaid, voluntary, apprenticeship, traineeship. ---- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- +-----------------+-----------------+-----------------+-----------------+ | **Type of | **Features** | **Advantages** | **Disadvantages | | work** | | | ** | +=================+=================+=================+=================+ | Full-time | - Continuing, | - Additional | - More time | | | ongoing | pay for | at work | | | employment | working | | | | | more | - Not having | | | - Number of | | time for | | | hours per | - Hourly rate | hobbies | | | week is 38 | is higher | | | | or more | if I work | | | | | at night or | | | | - A range of | on weekends | | | | **entitleme | | | | | nts** | - Earning | | | | received | higher | | | | | income | | | | | easier | | | | | start | | | | | saving on | | | | | regular | | | | | basis | | | | | | | | | | - Entitles | | | | | wide range | | | | | of non-wage | | | | | benefits; | | | | | paid | | | | | holidays | | | | | leave and | | | | | long | | | | | service | | | | | leave | | | | | | | | | | - Job | | | | | security | | +-----------------+-----------------+-----------------+-----------------+ | Part-time | - Ongoing | - Earn money | - Because | | | employment | on regular | work fewer | | | | basis | hours, | | | - Number of | | receive | | | hours per | - Job | smaller | | | week is | security | weekly pay | | | fewer than | because | and reduced | | | 38 | work | entitlement | | | | regular | s | | | - Number of | days and | | | | hours may | regular | - Do not | | | be fixed or | hours but | receive | | | variable | for fewer | loading | | | | days and | paid casual | | | - Entitlement | hours | staff | | | s | | | | | received on | - Receive of | - | | | a | entitlement | | | | **pro-rata* | s | | | | * | (e.g., work | | | | basis | 3 days, | | | | | entitled | | | | | 3/5ths | | | | | non-wage | | | | | benefits | | | | | | | | | | - While | | | | | studying, | | | | | offers | | | | | better | | | | | conditions | | +-----------------+-----------------+-----------------+-----------------+ | Casual | - Employed on | - Paid | - Do not | | | hourly | loading; | receive | | | basis | extra pay | entitlement | | | | on top | s | | | - No | normal | such as | | | permanent | full-time | long | | | weekly | rate | service or | | | roster | | sick leave | | | | - Flexibility | | | | - Hours vary | agree or | | | | from week | refuse to | | | | to week | work at | | | | | particular | | | | - Work for | time | | | | more than | | | | | one | | | | | employer. | | | | | | | | | | - No access | | | | | to | | | | | entitlement | | | | | s | | | | | but a | | | | | **loading** | | | | | received to | | | | | compensate | | | +-----------------+-----------------+-----------------+-----------------+ | Self-employed | - An | - Freedom and | - No | | | individual | flexibility | guaranteed | | | who works | to work | income | | | for | where and | | | | themselves | when | - Lack | | | | | financial | | | | - Making | security | | | | business | | | | | decisions | - Pay for own | | | | and being | entitlement | | | | responsible | s | | | | for | | | | | businesses' | - If sick, | | | | success | earn no | | | | | money | | | | - Tax | unless I | | | | advantages | have | | | | | insurance | +-----------------+-----------------+-----------------+-----------------+ | At home | - Boss pays | - Flexibility | - Struggle | | | employee | | motivation | | | work from | | | | | home | | | +-----------------+-----------------+-----------------+-----------------+ | Voluntary | - No | - Contribute | - No money | | | financial | more | | | | payment | community | | | | | | | | | - E.G., surf | - Satisfactio | | | | lifesavers | n | | | | | helping | | | | | others | | +-----------------+-----------------+-----------------+-----------------+ | Apprenti- | - Workplace | - Work | - Paid less | | | pays person | alongside | than if | | ceship | learn job | experienced | fully | | | | employees | qualified | | | - training | and gain | | | | involves | knowledge | | | | studying | | | | | qualified | - Boss | | | | practitione | provides | | | | r | equipment | | | | of a trade | needed | | +-----------------+-----------------+-----------------+-----------------+ | Trainee-ship | - Combine | - Work | - | | | employment | parttime | | | | and | allow study | | | | training to | | | | | gain | - Promoted | | | | qualificati | when finish | | | | on | training | | +-----------------+-----------------+-----------------+-----------------+ **Paid** Performing services for 1 hr + per week in return for receiving income **Unpaid** Tasks performed without receiving income **Entitlements:** non-wage benefits such as long service or sick leave **Pro-rata:** proportion of normal full-time benefits related to hours worked **Loading:** extra pay to compensate casual employees for lack of access to entitlements ---- -------------------------------------------------------------------------------------------------------- 3. **Define** various sources of income, including wages and salaries, commission, profits and dividends: ---- -------------------------------------------------------------------------------------------------------- **Wages:** what employee receives in exchange labour. Often fixed paid in increments. **Salary:** total remuneration paid employee. Include base pay, super, leave allowances, other bonuses. **Commission:** Percentage of bigger sale. **Profit:** Self-employed earn profits. Profit = revenue -- expenses. **Dividends:** sum money paid shareholders of a business. ---- --------------------------------------------------------------------------------------------------------- 4. **Explain** how the nature of work has changed and how it is likely to change in the future, including: ---- --------------------------------------------------------------------------------------------------------- - **The use of statistical data to examine patterns of employment** According to 2021 census data, over ½ of Australians work in these 5 industries +-----------------------------------+-----------------------------------+ | **[Industry]** | **[Workers]** | | | | | Health and Social Care | 8. million | | | | | Retail | | | | | | Construction | | | | | | Education | | | | | | Professional services | | +-----------------------------------+-----------------------------------+ In Australia, the industries that were projected to grow the fastest between 2018 -- 2923 are Healthcare and Social assistance (14.9%) and Education and training (11.2%) - **Changes in nature of work and workplace arrangements due to the impact of technology and globalisation** [Technology changing workforce:] - Interviews conducted over zoom, skype - More flexibility in the workplace and ability to work from home - Introduction of AI to assist with work or provide ideas -- increased productivity and efficiency +-----------------------------------+-----------------------------------+ | **[POSITIVE]** | **[NEGATIVES]** | | | | | - Improved productivity and | - Reduces the number of | | efficiency; robotics, | workers- increase | | manufacturing machinery | unemployment, increase | | | redundancy rates in certain | | - Provide higher quality of | industries (primary industry- | | good and services to | farming and manufacturing) | | customers, increase price, | | | increase profits | - Less face-to-face | | | interactions- limited | | - Enhance customer service and | relationships with | | user experience | colleagues, decrease in | | | workplace enjoyment  | | - Create jobs in new industries | | | (coding) | - Security issues | | | | | - Soft skills, creativity and | | | innovation are more valued | | +-----------------------------------+-----------------------------------+ [Globalisation changing workforce] - Globalisation is how trade and technology have made world into more connected and interdependent place. +-----------------------------------+-----------------------------------+ | **[POSITIVE]** | **[NEGATIVES]** | | | | | - More access to resources and | - Global businesses face more | | customers | competition which can impact | | | local businesses | | - Access to new | | | markets/cultures | - Negative implications for | | | environment | | - Lower cost of production - | | | better technology lowers | - Increased competition for | | labour | jobs | | | | | - Wider access to jobs and a | - Unequal economic growth | | pool of candidates | | | | - Increase potential global | | | recession | | | | | | - Developing countries | | | exploited | +-----------------------------------+-----------------------------------+ [Changes to worklife balance] - Must ask why have to go back to work (office) \--\> how does it benefit workplace, improve productivity - Pandemic changed lives as over 1/3rd workers complete jobs at home - Changes how and when work is done - 15% office occupancy in Melbourne 2019, and 18% in Sydney - Long commutes, cheap technology, freedom - Major employers weighing up how much real-estate needed - Hybrid model of work; building workplaces provide flexibility so do best work each day - Staff more productive and happier - Tools; email, video conferencing and shared documents (around for years) - Pandemic made employers trust staff to work even when cannot see them  *As women have entered the workforce in greater numbers and continued to work after childbirth, the need for formal childcare has increased leading to increased opporuntiies and growth in the childcare industry. Increase flexible working options, offering benefits such as parental leave (men and women) and part-time work allowing greater flexibility.* A screenshot of a computer Description automatically generated *Women's lower weekly earnings is due to the differences in full-time and part-time participation rates.* - **The emergence of the sharing economy** - The *sharing economy,* sometimes called the 'gig economy', connects consumers to people who have products or services to sell, hire or lease via an online platform. It includes services such as Airbnb, Uber and Airtasker. - The sharing economy has disrupted many traditional industries such as the taxi industry (UBER) and travel industry (AIRBNB). - The sharing economy provides various advantages to consumers. These include app features such as ratings and tracking, an increase in the products or services available to you and potentially cheaper goods and services. - Because workers are often engaged as independent contractors, NOT employees, they often do not have protection over working conditions or regulated pay. However, this also means that workers can work their own hours and be their own 'boss' +-----------------------------------------------------------------------+ | - The Global sharing economy is projected to continue to grow | | rapidly - | | | | - According to consensus forecasts, the sharing economy market is | | expected to reach over \$1 trillion in revenue by 2031.  | | | | -   | | | | - *From | | \* | | | | -   | +-----------------------------------------------------------------------+ -